Ras Al Khaimah’s (RAK) engine for economic and industrial growth has been its inward investment agency, Ras Al Khaimah Investment Authority (RAKIA), which, since being founded by decree in 2005, has succeeded in attracting more than $2.5bn in industrial investment. From the outset, the authority’s mandate was to attract sustainable industries and to help the emirate build a diverse economy.
RAKIA knew at its inception that it had a considerable challenge to overcome in persuading businesses to set up in a region that, in the beginning, was largely desert. To that end it pledged to strive to do what it could to minimise the frustrations often felt by companies making major on-the-ground investments in new locations.
Part of this mission lay in ensuring that RAK built the right overarching infrastructure for business – the appropriate logistics facilities, healthcare, education and housing – while promoting the natural advantages of the emirate, chief among which is its strategically advantageous position in the Gulf.
Meeting investor needs
One of RAKIA’s key roles is to provide liaison and one-stop-shop services that meet the everyday needs of investors, even from before the point they have made the decision to invest. For many investors, the greatest blessing RAKIA confers is a reduction in red tape, easing potential headaches such as the issue of licences, project approvals, visas for investors and their employees, design approvals and construction permits, and the acquisition and provision of land.
“The fantastic thing is that you only need to deal with RAKIA. There’s no need to go all round the houses to sort out everything you need,” one investor tells fDi Magazine.
RAKIA prides itself in the professionalism of the service provided by its personnel, their attitude and the very apparent appetite they have not only for wooing investors but for ensuring their continued satisfaction. In this sense, RAKIA’s consultants are keen to be seen to be proactive, engaged and responsive.
But it goes beyond attitude. RAKIA offers some very significant incentives to investors, particularly where they have indicated they are making a long-term commitment. Headline attractions include a project cost up to 20% or 25% cheaper than comparable destinations, a speedy registration process, and subsequent reduction in overheads incurred by red tape and delay. RAKIA will also form joint ventures with companies where it believes there is a strategic reason for doing so.
Get in the zone
Investor activity takes place within RAK’s two industrial zones, Al Hamra and Al Ghail, managed by RAKIA. For the majority of non- United Arab Emirates companies, the real attraction lies in the free zones that allow businesses to set up companies with 100% foreign ownership, free of income and corporate tax and with full repatriation of capital and profits.
There are no restrictions on the hiring of expatriates and the usual UAE labour laws do not apply.There are, however, restrictions on the business horizon for freezone companies, as the area is intended for export businesses only – although they can sell products in the UAE through local agents or distributors, with normal customs duty applied.
For many investors, getting things done quickly is a prime consideration. RAKIA can step into the breach by providing assistance in obtaining all necessary licensing, offering the requisite acreage of land (cheaply and levelled), and delivering construction permits within one week of submission.
Free-zone companies are able to import the raw materials they need for manufacturing free of duty and a 5% duty cap applies to most other goods, although there are a number of exemptions.
As most investors pay little or no tax, one of the ways in which RAK benefits from their presence is through the fee the government receives for the formation of a business. On average, these add up to $6534 for industrial companies, $4628 for trading companies and $5172 for consulting and professional services firms, including registration charges, the opening of an immigration file, certificate of incorporation, service charges, membership of the chamber of commerce and industry, and a RAKIA licence fee.
The fantastic thing [about RAK] is that you only need to deal with RAKIA.
RAKIA has also invested considerably in the provision of infrastructure to support investors. Businesses, particularly in lessestablished environments, are concerned they have access to sufficient and affordable power.
To meet that need the investment agency built a 65-megawatt power plant in Al Ghail and a 45-megawatt plant at Al Hamra – and is now producing surplus electricity.
Other facilities provided by RAKIA include a desalination plant, a clinic at Al Hamra for the use of investors and their workforce, workers’ accommodation, a residential complex for executives, including studio flats and one-, two- and threebedroomed flats, and office space with a sea view
In line with a global shift in emphasis, there has been a deceleration of building projects in RAK, although RAKIA insists that all the projects in which the state has an equity stake are continuing. Rather, the agency is interested to hear proposals from more sustainable industries in for the long haul and not just the quick buck. RAK has always seen itself as the most industrially inclined of the emirates and is consolidating its reputation.
The manufacturing industry is seen as the most important sector in RAK and in 2008 there were 150 manufacturing establishments in the emirate with a combined value of $700m and employing 12,662 workers. Nonmetals minerals are also important – RAK is the largest cement producer in the UAE and four Portland cement plants produce about 50% of the country’s total.
Given RAK Ceramics’ status on the world stage as a major tile manufacturer, it is no surprise there are investment opportunities in the ceramics and related industries such as glass, where investors include not only the French company Arc International (owner of the Luminarc brand), but also US Guardian Glass, which produces some 700 tons of glass for industrial and manufacturing processes. Agriculture is also a significant activity for RAK.
Areas where investors are already building a local industrial knowledge base include the food sector, in particular grain and oil seed milling, sugar and confectionary product manufacturing, animal food manufacturing, dairy products and baking.
Chemical manufacturing companies are making pharmaceuticals, medicines, cleaning products, paints, fibres, filaments and resins. There are companies involved both in primary metals (non-ferrous metals, iron and steel mills, ferroalloys and foundries), and fabricated metals (including forging and stamping, cutlery and hand tools, spring and wire products, and architectural and structural metals).
There is also burgeoning activity in the transport sector, including the making of automotive parts, aerospace products and parts manufacturing, and ship and boat building. A big player here is Ashok Leyland – an Indian automotive company that established a fully integrated commercial vehicle plant in RAK in 2008 – the first in the Gulf Co-operation Council.
For quite some time to come there will be openings for investors looking to contribute to the creation of the kinds of infrastructure RAK needs to keep pace with its own activity – building IT and technology parks, schools, hospitals and health centres, and, on a bigger scale, power generation, desalination plants and sanitation.
While not rich in oil and gas by the standards of the Middle East, opportunities still exist for exploration and building refineries.
Of course, not all of these sectors are at the same pitch of development. Some are already at the stage of becoming a nascent ‘hub’, enabling new entrants to benefit from existing skills and expertise, while others are just starting to take off and are offering exciting opportunities for pioneer companies.
A vintage year
While 2008 was a bumper year for RAK, 2009 saw investor confidence hit hard in line with the global picture. But 2010 is starting to look like another good vintage. At a recent business meeting in Dubai, RAKIA’s chairman, Khater Massaad, told delegates that in the first four months of 2010 RAKIA had issued a total of 400 licences, representing 78% growth over the corresponding period in 2009 and taking the total number of registered companies in the emirate to almost 3000.
Interestingly, an increasingly high percentage of its investors are from India, followed by the Middle East and Europe. Three-quarters of European investors are from seven countries – in descending order, the UK, Germany, France, Netherlands, Italy, Switzerland and Austria.
RAKIA knows the emirate’s profile is not yet so high that it can afford to be complacent, and that it must stay engaged with the investment community at large to maintain the kinds of investment it needs. However, by keeping up momentum, a flexible, investorfocused regime and a can-do attitude, it is making a substantial contribution to the business profile of the Gulf.
This report was sponsored by RAKIA. Reporting and editing were carried out independently by fDi Magazine